Britannia set to expand its dairy business, to take on ITC and rival Amul

Picture source: ThinkStockFood company Britannia Industries plans to scale up its dairy products business into a full-fledged unit, targeting a fivefold increase in sales, and relaunch the portfolio of Tiger biscuits to improve market share.

The company intends to set up a standalone division for its fledgling milk product business to compete with newcomer ITC and established rival Amul. The new division will be in addition to the existing dairy unit, which accounts for less than 5 per cent of Britannia’s sales, managing director, Varun Berry, said. "We are putting a new team in place and hope to do what it takes to be a Rs 2,000 crore company in dairy," Berry said.

Britannia’s existing dairy business consists of co-packing and selling products such as butter, cheese and curd. At Rs 400 crore, the dairy business contributes less than 5 per cent of the Bengaluru-based company’s turnover.

"That business is growing 10 per cent every year and will continue to run the way it’s running with the current team. But if we’re serious about dairy, we cannot continue on an outsourced model," Berry said. "We need to evaluate whether we should be looking at doing the end-to-end operations ourselves to take this business to five times what it is today."

The new model could involve milk procurement, processing and selling. Nusli Wadia-promoted Britannia’s joint venture with New Zealand’s Fonterra Dairy to sell milk and milk products, inked in 2002, was called off after seven years.

Britannia’s net profit fell 19 per cent to Rs 218.6 crore in the July-September quarter from a year earlier after phasing out excise benefits. Net sales increased 12 per cent to Rs 2,191 crore.

The company also wants to fix its other weak link — the value biscuit segment, where it has a share of 8-9 per cent. Britannia is relaunching the Tiger brand portfolio, including glucose, cookies and creams.

"The entire Tiger brand is now getting relaunched. Next month we will relaunch value creams. I’m hopeful that will get us some more share here," Berry said.

The value segment accounts for about 46 per cent of the total biscuit market.

"If you look at the Hindi belt, it’s very strong for the value segment and Parle rules here. We had not been able to get a strong distribution going in that belt but last year we started and now we are at a stage where we feel confident," he added.

On outlook for the next two quarters, Berry said: "We’ve been waiting too long for momentum to come back and it’s still in single digits if you see across companies. I don’t see it coming back in a hurry and could take the next six months or so."